1/3 SET UP ... FXEN ... Swing trade ......................
FXEN is setting up in what I'm going to call, a bottom fishing pattern.
More than 90% of trades should be taken in the direction of the trend. There are a few exceptions to this and FXEN looks like it meets the criteria for a counter trend trade.
Price has been in a steep down trend with price now testing the fourth quarter 2004 lows. This price range was the base for the explosive move to the upside. (This would have to be considered a level of demand.)
Also note the wide range bars the last couple of weeks! This shows the "get me out at all costs" mentality that I am counting on to set this trade up off the daily chart.
Weekly chart:
stockcharts.com[h,a]waclyiay[d20040902,20060102][pb40!b20][vc60][J65924330,Y]&pref=G
In looking at the daily chart, note the last 3 trading sessions. The pattern for Wednesday and Thursday were narrow range bars. That indicates that the downward momentum was slowing down. (This indicates the "get me out at all costs" people are gone.) Now look what showed up Friday! A Doji on above average volume. This is demand coming to market. This demand is showing up at precisely the price level that confirms demand from the fourth quarter of 2004. This is precisely the point we would expect to anticipate a low risk entry.
To confirm this, a look at the daily chart will also show a wide separation between price and the 20 period moving average. I expect that distance to close in the coming days.
I'm not saying we will get an explosive up move like we did in the early 2005, but the set up is worth a short term trade and then another evaluation.
Daily chart:
stockcharts.com[h,a]daclyiay[d20051102,20060102][pb50!b20][vc60][J65924330,Y]&listNum=1
There are several entry techniques we can use.
1. If price gaps up 15 to 20 cents or more at the open, you can buy it immediately or buy above the 5 minute high.
2. If price opens up relatively even, wait 30 minutes and if price is positive, buy above the 30 minute high.
3. Or, one can wait until price trades above Friday's high.
First price target is the $9 price range, give or take a couple of nickels.
The initial stop should be placed under Friday's low, around $7.85.
If you are going to bottom fish, this set up is how you should bait the hook.
dabum |
